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Croatia GDP Q4 2019

Croatia: Economic growth moderates in Q4 2019

The economy lost traction in the final quarter of last year, according to detailed GDP data released by Croatia’s Statistical Institute (CBS) on 28 February. Annual economic growth cooled to 2.5% in Q4, from the 2.9% expansion logged in Q3. That said, the fourth quarter’s result brings full-year growth for 2019 to 2.9%, up from the 2.7% expansion clocked in 2018.

Weaker conditions on the external front and destocking drove the fourth-quarter slowdown. Exports of goods and services accelerated (Q4: +5.6% year-on-year; Q3: +5.1% yoy), thanks to a surge in foreign sales of services, which compensated for much weaker merchandise exports growth. Meanwhile, import growth fell sharply from 4.3% in Q3 to 0.1% in Q4. However, due to different basis for comparison, the external sector contributed negatively to growth in the fourth quarter after contributing positively to the overall print in the third quarter.

On the flip side, domestic demand remained robust. Private consumption picked up amid resilient wage and employment growth, increasing 4.0% in the quarter (Q3: +3.1% yoy). Moreover, growth in government consumption accelerated from 2.9% in Q3 to 3.5% in Q4. However, fixed investment lost some steam in the quarter, rising 4.0% after climbing 5.0% in Q4, likely due to some moderation in EU funds inflows and in investment in tourist facilities. Furthermore, inventories fell notably compared to one year earlier, most likely due to the sour performance of the manufacturing sector, weighing on the overall economy.

Growth is expected to decelerate this year, as a challenging external environment will dent foreign sales and domestic demand will ease on softer investment activity. That said, growth should remain healthy, underpinned by solid private consumption amid income tax cuts; sustained wage growth; and still-solid absorption of EU structural funds. A weaker Eurozone clouds the outlook.

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